Nature and significance of demand forecasting
1. Demand forecasting starts with defining the product or the product mix. This will depend on the nature of firm and its corporate image. 2. Once the product is decided the forecast will now describe the buying objectives of the product. The buying objectives will determine the target population for whom the product is being produced. 3. The buying objectives will influence the product design, the cost and ultimately, the price. 4. Depending on the product design, the inputs are drawn. The factors need to be imported or domestically procured. The demand forecast will provide the sources and the costs. 5. To define the market prospects the product is identified with the product cycle. The product may belong to any of the states of product cycle: interdiction, growth, competition, stagnation or decay. The stage to which the product belongs will determine the selection of the product and forecast. 6. Specialized inputs and labour may require efforts in procuring and training. 7. The production and delivery schedule is drawn depending on the market. Seasonal good may have different delivery schedule as compared with a regular good of consumption. 8. The price is decided and the cash flows are estimated. The sales, revenue profits, costs and the rates of return are estimated for period of three to five years. 9. The market is described with respect to risk of competition, Government policy, future prospects. In case of any risk the possible methods of overcoming risk will be indicated.
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